The Budget would be streamed in a few hours. The echoes are growing stronger for certain expectations from the Union Budget 2021-22 to be presented by Finance Minister Nirmala Sitharaman. If you are an individual tax payer, then this is what you should be looking out when finance minister Nirmala Sitharaman reads out her Budget speech.
New Income-tax regime rates
Despite the new income-tax regime levying lower tax rates, anecdotal evidence suggests that a large section of taxpayers has not opted for it. While the rates for the new tax regime are lower than the existing one, there is a need to slash them further. The primary reason to reduce the tax rates further is that out of the 70 exemptions and deductions – that need to be given up when you accept the new tax regime – many are linked to expenses and not just additional investments to be made for tax savings.
Also read: Which income-tax regime should you choose; old or new? A 5-step guide
Enhancing Section 80C
With the rise in expenses and axing of income due to economic mayhem, individual taxpayers are looking for relief on the tax front. Since major deductions for both expenses and investments – some mandatory investments such as provident fund – are set in Section 80C, experts say that there is a need to enhance the Section 80C limit. Taxation experts are anticipating an increase in Section 80 C limit to Rs 3 lakh from the existing limit of Rs 1.5 lakh, last changed in.
Currently, a total of Rs 75,000 (Rs 25,000 for self and Rs 50,000 for senior citizens) can be deducted from taxes against payment of health insurance premium under Section 80D. There is a need to increase this limit considering the rising cost of health insurance.
Also listen: Simply Save podcast: Section 80D tax deduction on health insurance must increase
“Government can consider increasing this limit to allow a deduction of 50,000 for parents less than 60 years of age and 1 lakh for parents above 60 years of age. This tax benefit will encourage more people to opt for health insurance for their elderly parents,” says Krishnan Ramachandran, Managing Director & Chief Executive Officer, Max Bupa Health Insurance.
Additionally, since there are many who do not get health insurance coverage due to past diseases or age, there is a need to permit deduction for medical expenses apart from health insurance premium.
Another area that ranks high on the Budget wish list is the treatment of equity mutual funds at par with unit-linked investment plans (ULIPs). While equity funds are subject to long-term capital gains at 10 percent above Rs 1 lakh, for a holding period of more than one year, ULIPs enjoy tax-free treatment of gains.
Also, there is a need to increase the threshold for long-term capital gains arising from sale of listed securities to Rs 2 lakh and reduce the tax rate to 5 percent.
NRI India stay
The math has gone awry for non-resident Indians, who need to stay in India not beyond 120 days in the past year to avoid being taxed as a resident Indian. There is also a limit of less than 729 days to be adhered over the last seven financial years.
A clarification on the tax treatment of such NRIs who couldn’t fly to their respective countries owing to the pandemic is anticipated in the Union Budget